With the three averages adding more than one percent on their third successive positive close, we stand with yesterday’s analysis.
Three plus days occur more frequently when prices are trending up than when the path is down. Indeed, the data in our diagram reveals that bull markets’ three day positive streaks happen near three times the rate of bear markets.
This confirms yesterday’s projection that further price gains lie ahead.
Nevertheless, the statistics of daily gains greater than one percent by all three averages yields a cautionary signal: these have a significant correlation with bear markets. They accounted for 19 and 14 percent of all days during the 2000/2003 and 2007/2009 declines. The frequency was just .7 percent in the 2003/2007 expansion. While they account for 12 percent in present expansion, these large gains are features of bear markets.
Yet unlike the strong next day positive performance during bull markets of two upticks in a row, the record of the days following three straight gains is mixed. Indeed, the S&P500 fell more often than it rose during the 2003/2007 expansion.
This is the third up-three-straight-days this year. The previous close was on April 10; all three averages went on to enjoy a fourth up day. The earlier 2013 occurrence was in the beginning of March; while the DJIA and the S&P500 moved higher the next day, the NASDAQ declined.
DJIA 1.05 percent
NASDAQ 1.11 percent
S&P500 1.04 percent
